Custom «Starbucks Strategic Management Case» Essay Paper

Starbucks has built a strong diverse market over the years. Within its brand categories, the company’s various products are positioned to diverse segmented markets. Within the brands are coffee drinkers, which are categorised as those who drink simple to premium beverages. Among these groups are those who live in urban centres, aged 18-60, university students and other communities and professionals working in the managerial and executive positions (Gallaugher & Ransbotham, 2010). The other categories of those who embrace coffee are those who care about the environment, and would want to associate with a company who cares for environment and its employees at the same time. Similarly, Starbucks positions its products to those who are in the higher echelon of the society; those who value customer service.

The brand position, therefore, would come out as total brand experience that extends beyond normal experience. This can be illustrated in the following diagram:

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Compared to competitors, as indicated in the diagrams, the company’s image is far beyond its competition’s image and positioning. In reality, most of the Starbucks’ competitors focus on low-end products to attract customers, while some focus on their sense of community. For instance, Tim Horton’s is priding itself as a truly Canadian company. Others, on the other hand, focus on the distribution of their extensive networks of branches. This kind of narrowed brand experience leaves Starbucks as the only company that has a large brand experience, thus a strong product positioning in the market.

Possible Alternatives

Starbucks has managed to ward off competition because the company offers more than just a product. In essence, the values are intangible and inherently form critical part of the overall values offered to customers. This approach is very important to entrench the company’s competitive advantage as well as the company’s products and brand positioning.

In order to maintain or improve the competitive advantage, the company has embarked on maintaining its premium quality beverages and other products.

In order to maintain the brand image, the company needs to continue with its ideals and sense of responsibility. It should maintain the current standard and strive to increase innovations on areas that would enhance the intangible and emotional values associated with the company. The reason is that Starbucks’ competitors are in a position to reach the standard of premium quality. Thus, it is the emotional attachment which might separate Starbucks from its competitors. It is ideally very difficult for competitors to match a company whose brand image means more than the product or service they offer. It is this intangible value that brings about brand loyalty, which leads to a strong competitive advantage.

The strategy of Starbucks has been to offer diverse products to all its market segments. The need to focus on its competitive advantage and continually build a premium brand will ensure that the company is not affected negatively by brand dilution. The key is to be selective and introduce products that maintain the emotional attachments its brand is known to provide. For instance, the company’s recent introduction of a new mix of coffee was met with enthusiasm. However, such rapid introduction of products dilutes the brand image of Starbucks, thus not necessary in the long sustainable brand image.

To maintain this standard, the company would have to ensure that quality is to the top-notch standard. It, therefore, calls for the company to ensure that every product introduced into the market is the best in terms of quality. This is because the company stands for premium products, and should thus remain so. In other words, if Starbucks can maintain its premium quality product, it will still keep its market segment which seems loyal to the brand.

SWOT Matrix

Internal Factors

External Factors

Strengths

ü High profit;

ü High quality products;

ü Many channels of distribution and Vertical integration’

ü Many promotions;

ü Regular training of employees.

Weaknesses

ü High debt;

ü Inconsistent Financial flow;

ü High prices barring low income groups;

ü Increased working hours.

Opportunities

ü Low rates for the premium products;

ü Social marketing of shops;

ü Targeting baby boomers;

ü Increased coffee consumption in the global market.

S/O Strategies

ü Target the older generation with ads;

ü Improve the channels of distribution to penetrate further the global market;

ü Use proper inventories to help manage international market.

W/O Strategies

ü Make use of the current low prime rate in order to pay off the debts;

ü Increase international market share to leverage on the financial outcome.

Threats

ü Stringent labor laws;

ü High rate of unemployment;

ü Increased numbers of local businesses;

ü Race diversity;

ü Economic recession.

S/T Strategies

ü Increased promotional activities to advertise more, so as to counter local shops’ penetration;

ü Control the manufacturing as well as distribution so as to incorporate more products that targets more diverse groups.

ü Reduce on the time of work for employees so as to avoid low suits emanating from the labor laws.

Starbucks can employ various strategies in order to improve the delivery of products and services. The company can take advantage of its strength and explore the opportunities available in the market. The increased number of aged baby boomers could provide Starbucks with the opportunity to target their ads and promotions towards this group. This group is known to have more time and discretionary income unlike the younger generation. The company can also employ vertical integration and good channels of distribution to increase its global presence by expansion.

BCG Matrix

High Market Growth

QUESTION MARKS

Low Global market share/ high growth opportunities;

Increase global investment.

STARS

High Market share vs. High Market Growth;

Performing well and widening of opportunities.

DOGS

Small market share

and

Slow market growth

Weak in market, small profit margin

CASH COWS

High share of the total market and Low market growth

Limited opportunities in the market

Starbucks can enter the international market more easily because express foods and global coffee consumption is increasing on a daily basis. The demand for healthy living has also pushed Starbucks’s products to the new level of demand, thus the company needs to take advantage of the increased opportunity to build its global brand.

However, the inherent threat is the increased inflation rates, which threatens the company’s premium products. Consumers, therefore, demand for the low priced products, which can dilute the company’s image. This is coupled with the competitors who price their products at the low end market to impress the customers. Still there are the increased hypermarkets and supermarkets that sell coffee and other products similar to ones from Starbucks’s.

Space and other Matrices

Starbucks has a very strong asset base. The company is financed through equity, which is considered at a safe level such that even if creditors start to demand repayment. It is indicated that long term debt-to-equity ratio is a mere 0.0017, a figure considered quite low. It is estimated that the return on asset ratio has consistently increased by 14 percent since 2005 (Starbucks Coffee Company, n.d). There is also the estimated growth of 21 percent in terms of annual income since the year 2005.

Core Values to Create the Desired Culture

When Starbucks is able to maintain its premium market niche, it must decide and stick to the premium market. The recent trend of introducing instant coffee mix, which is considered to be of low quality, is not a good idea as far as brand standards are concerned. Traditionally, position of a product is defined by the consumer in parameters such as price, quality, competitors, class and how the product is used (Meyer & Rowan, 1977). It, therefore, means that Starbucks should maintain its premium position. With this, innovative products will be in the market to ensure that the company’s image and relationship marketing is to the top notch. The specific market position is to ensure that Starbucks continues to maintain its premium status. The best way to do this is to be more innovative with the premium products. On top of quality is price which determines the value of company’s products.

In order to maintain premium standard, company should strive to support the purchase of quality coffee beans, continuously train its employees and build relationship with the customers.

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Evaluation of Current Organizational Structure

The basic organization structure that Starbucks adopted is not new to the eyes of management professionals. The executives of the company oversee its operations. Headquartered in Seattle, Washington, Starbucks has its other managers, commonly referred to as district managers that manage the regional stores. The district reports directly to the executives based at the company’s headquarters. Under the district managers are store managers who are the bosses at each of their respective stores (Thompson & Arsel, 2004). Then there are the shift supervisors. The last group in the base of the pyramid are the baristas. The management structure at Starbucks ensures that the company gets to control all the activities at each store.

Executive Summary

Starbucks’ strategy has been to ensure that they capture wide customer base, considering the recent introduction of instant coffee mix and other products targeting low end market. Although Starbucks has thrived on the high end products, their latest introduction of low priced coffee may be meant to capture a wider market share dominated by its competitors. Its total brand experience has helped the company extend its relationship with the clients. In order to maintain the position, the company must ensure that its premium-priced products maintain the standards it is associated with. In the SWOT Matrix analysis, Starbucks prides itself with high quality products which generate healthy profits for the company. The company trains its employees regularly, can afford to charge low rates for high quality products. However, it also finds it difficult to maintain its high debts and high pricing that limits low end market penetration. The company can take advantage of its strong brand recognition and venture more into international market, which has a bigger growth potential. The company’s organization structure is that of brick and mortar, which allows it to monitor its stores closely.